The United States Court of Appeals for the Eleventh Circuit affirmed a lower court’s dismissal of a class action alleging violations of the Truth in Lending Act. Plaintiff, a borrower, filed a class action alleging that defendant, a loan servicer, violated TILA by failing to provide notice of a transfer in ownership when it received a mortgage assignment from MERS.
In affirming the lower court’s ruling, the Eleventh Circuit noted that based on the plain language of TILA, the disclosure obligation "is only triggered when ownership of the ‘mortgage loan’ or ‘debt’ itself is transferred, not when the instrument securing the debt (that is, the mortgage) is transferred." The Eleventh Circuit rejected plaintiff’s argument that under Alabama law, the transfer of a mortgage also transfers the obligation the mortgage secures unless the parties agree otherwise because of the administrative convenience exception under TILA. The "administrative convenience" exception is triggered if the servicer was assigned the obligation "solely for the administrative convenience of the servicer in servicing the obligation." The Eleventh Circuit found that such an exception existed because the assignment to the servicer was solely for the purpose of allowing the servicer to conduct foreclosure proceedings on behalf of the beneficial owner of the debt. Of import, the Eleventh Circuit allowed defendant to invoke the "administrative convenience" exception even though it was the loan owner who benefited from the convenience, because, according to the Eleventh Circuit, a contrary ruling would render the exception "a nullity."